The Federal Reserve’s preferred measure of inflation showed another acceleration in December and wages rose 4.5% last year, the most since 2006, reports showed Friday.
Here’s a quick look at the most significant economic indicators of the day and what they tell us.
Inflation, Spending, and Personal Income
- One of the two most widely used measures of inflation (the Federal Reserve’s preferred measure) showed inflation continued to accelerate in December.
- Prices rose 5.8% in the year through December, according to the Personal Consumption Expenditures survey from the Bureau of Economic Analysis, a new high since 1982. In November, that rate was 5.7%. So-called core inflation (which excludes food and energy prices because they tend to be more volatile) accelerated to 4.9% from 4.7%.
- Core inflation was slightly greater than the 4.8% economists had expected, and will encourage the Fed to stick to its plan of raising borrowing costs to clamp down on inflation, economists said.
- Spending fell 0.6%—more than forecast—as consumers pulled back on buying goods, a dip that some economists attributed to people having done their holiday shopping early.
- A sharp increase in wages counteracted declines in business owners’ income—likely caused by the surge in COVID-19 cases from the omicron variant in December—to make income rise 0.3%, slightly less than economists had forecast.
Wages and Salaries
- Wages and salaries were 4.5% higher in December than a year earlier, the highest increase since the Bureau of Labor Statistics began keeping track in 2006. Rising wages helped drive a 1% increase in total compensation (including benefits) over the quarter, according to the Employer Cost Index, somewhat less than the 1.2% economists had predicted.
- The steep increase in wages comes as no surprise. Employers have been scrambling to fill near-record numbers of job openings since the pandemic-era recovery in the job market tilted in favor of workers.
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